Magazine

Bloomberg View

The Dodd-Frank financial reform law requires the Federal Reserve to set a limit on how much banks may charge for processing debit-card transactions. The average fee now is 44 per transaction. The Fed has proposed a limit of 12 beginning July 21.

The banks, naturally, don't care for this. These transaction fees bring them about $20 billion a year. So they have been conducting one of those ludicrous lobbying campaigns that sweep over Washington from time to time, warning of higher prices, reduced services, plagues of locusts, more naked congressmen on Twitter, and just about any deplorable development you can think of if the new regulations are allowed to go through. On June 8 the Senate defeated a proposal to delay the limit for six months to allow time for further study.

The banks' campaign against the price cap is so elaborate, expensive,and sometimes disingenuous that it is natural to assume they must be in the wrong. They've spent millions on lobbying. Organizations with preposterous names such as Americans for Prosperity—who isn't?—gin up letter-writing campaigns, and consultants stage other "grass-roots" activities to give the impression that citizens are deeply concerned about this issue—which they aren't.

Shenanigans aside, the big banks are in the right. Why should the government set the price for using a debit card? Most prices in our economy are set by the market—an arrangement that's worked pretty well over the past couple of centuries. If 44¢ is more than this service really costs, surely one of America's thousands of banks will take a deep breath and offer to do it for 42¢.

If Visa (V) and MasterCard (MA) have enough market power to prevent that from happening, the answer is antitrust, not price controls. It's too bad that America's banks don't have enough confidence in free markets to make an honest argument on their own behalf.

A LABOR COMPLAINT THAT JUST WON'T FLY

On June 14 in Seattle, an obscure administrative court heard a case that unions are hoping will help them stem the painful decline in labor's bargaining power. In this instance, the unions have picked the wrong battle.

The issue: whether Boeing (BA) illegally punished the local machinists' union when it decided in 2009 to locate a new plant to build its 787 Dreamliner in North Charleston, S.C., instead of the Puget Sound region of Washington, where Boeing has built planes since 1936. In April the National Labor Relations Board determined that Boeing's decision violated federal labor law because it amounted to retaliation for strikes.

The details of the case aren't quite so cut and dried. Boeing initially offered to build the 787 plant near Puget Sound on the condition that the union agree not to strike for at least 10 years. After talks broke down, Boeing accepted $170 million in grants and tens of millions more in tax breaks to construct the plant in South Carolina. By locating its new factory in one of the 22 right-to-work states that have adopted laws supporting nonunion employment, the company followed the well-worn path of textile manufacturers, automakers, and others that have moved South to reduce labor costs.

In defining the move as illegal retaliation, the labor board cited company executives' public statements about their desire to avoid strikes. That, the board concluded, demonstrated the executives' intention to punish the workers, who had staged strikes at Boeing factories four times since 1989.

Just to be clear: Workers have the right to strike. But companies are equally entitled to make strategic plans to avoid work stoppages. Boeing, which has more than 50,000 union workers among a global labor force of 157,000, didn't break a strike, crush a union, or intimidate union employees. Employment at Boeing's unionized Puget Sound plants is up by 2,000 since the South Carolina plant was announced.

Employers' quest for low-cost labor has been devastating to American workers. Textile and apparel manufacturing has moved largely offshore, at a loss of more than 1 million American jobs. Automakers who once paid high wages are offering new employees $14 per hour. Boeing's machinists understandably worry that the company's move to South Carolina signals a future of declining wages.

However, the pain inflicted on individual workers by companies' efforts to boost their competitiveness doesn't necessarily make those efforts illegal. Before the labor board files a complaint, it should be obvious that the target of the complaint has crossed a legal line. No such transgression exists in this case. Rather than the company punishing the union for striking, it appears that the board is seeking to punish the company for opening a plant in a right-to-work state.

A victory for the union wouldn't do much good for manufacturing workers. Having hired 1,000 workers and invested $2 billion in the South Carolina plant, Boeing expects its first 787 to be completed in July. If federal courts, the next likely venue if the administrative case isn't settled, endorse the labor board's ruling, work at the plant would stop.

With unemployment at about 9 percent and conservative governors in Wisconsin, Ohio, and elsewhere seeking to neuter public-employee unions, the U.S. labor movement has its back to the wall. The labor board was reflexively anti-union under the Bush Administration. Under the board's new Democratic majority, unions are no doubt eager to receive a better shake. Unfortunately, the complaint against Boeing is merely shaky.